Brown v The Queen - [2006] WASCA 145

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: BROWN -v- THE QUEEN [2006] WASCA 145

CORAM: MARTIN CJ
WHEELER JA
BUSS JA

HEARD: 24 MAY 2006

DELIVERED : 25 JULY 2006

FILE NO/S: CACR 43 of 2005

BETWEEN: GAVIN WILLIAM BROWN
Appellant
AND
THE QUEEN
Respondent

ON APPEAL FROM:
Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA
Coram  :DEANE DCJ
File No  :IND 1119 of 2003

Catchwords:

Appeal - Criminal law - Creating a false or misleading appearance of trading in securities on a stock market - Whether there is a hierarchy of offences in Corporations Act 2001 (Cth) s 998(1)

Legislation:

Corporations Act 2001 (Cth), s 998(1)

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

Appellant: Mr T F Percy QC & Mr A G Rowe
Respondent: Mr S D Hall SC & Ms E C J Needham

Solicitors:

Appellant: Murcia Pestell Hilliard
Respondent: Commonwealth Director of Public Prosecutions

Case(s) referred to in judgment(s):

Australian Securities Commission v Nomura International Plc (1998) 89 FCR 301
Hladin v The State of Western Australia [2005] WASCA 50
Laporte v The Queen [1970] WAR 87
Mordecai (1985) 18 A Crim R 149
R v Hooper [2004] NSWCCA 10
R v Young [2003] NSWCCA 276

Case(s) also cited:

Austin v The Queen (1985) 121 LSJS 181
Bresnehan v The Queen (1992) 1 Tas R 234
Bridges (1985) 20 A Crim R 271
Cheung v The Queen (2001) 209 CLR 1
Diefenbach v The Queen (1999) 108 A Crim R 19
Director of Public Prosecutions v England [1999] 2 VR 258
Kingswell v The Queen (1985) 159 CLR 264
Langridge v The Queen (1996) 17 WAR 346
Medcraft (1992) 60 A Crim R 181
Penny v The Queen (2002) 26 WAR 475
R v Birnie (2002) 5 VR 426
R v Boney; Ex parte Attorney-General [1986] 1 Qd R 190
R v Bright [1916] 2 KB 441
R v Causby [1984] Tas R 54
R v De Simoni (1981) 147 CLR 383
R v Meaton (1986) 160 CLR 359
R v Morrison [1999] 1 Qd R 397
R v O'Halloran (2000) 159 FLR 260
R v Olbrich (1999) 199 CLR 270
R v Scholes [1999] 1 VR 337
R v Starr [1999] WASCA 119
R v Stehbens (1976) 14 SASR 240
R v Teremoana (1990) 54 SASR 30
R v Thompson (1975) 11 SASR 217
R v Wright, unreported; CCA SCt of Vic; 13 May 1974
R v Wyllie [1989] VR 21
Savvas v The Queen (1995) 183 CLR 1
Walsh v The Queen (1996) 6 Tas R 70

MARTIN CJ: In my view, this appeal should be dismissed for the reasons to be given by Wheeler JA, which I have had the advantage of reading in draft, and with which I agree.
I wish to particularly endorse her Honour's observations with respect to the leniency of the sentence imposed. Having regard to the strong public interest in deterring the commission of offences which are destructive of confidence in the commercial systems which are of such profound importance to our community and of the notorious difficulty of detecting and successfully prosecuting such offences, the sentence imposed by the trial Judge was plainly at the very bottom of any appropriate sentencing range. Accordingly, on the basis of the facts found by the sentencing Judge, even if any of the grounds of appeal had been made out and it had become appropriate for this Court to re‑sentence the appellant, I do not myself see how any lesser sentence could properly have been imposed consistently with the considerations to which I and Wheeler JA have referred.
WHEELER JA: The appellant appeals his sentence of a total of $30,000 in fines for four convictions, after trial by jury, of making offers in relation to certain shares which were likely to create a false or misleading appearance with respect to the market for those shares. Section 998(1) of the Corporations Act 2001 (Cth) ("the Act"), which created the relevant offences, read at the relevant time as follows:
"False trading and market rigging transactions
(1)A person must not create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any securities on a stock market or a false or misleading appearance with respect to the market for, or the price of, any securities."
The maximum penalty for those offences was a fine of $20,000 or 5 years' imprisonment, or both.
The relevant facts are not in dispute, in the sense that it was alleged by the Commonwealth, and was therefore open to her Honour to have found, consistently with the verdict of the jury, that the background circumstances were as follows. The appellant at the relevant time held 1500 shares in the company Astron Pty Ltd ("Astron"). A company, Querion Pty Ltd ("Querion"), had two shareholders, being the appellant and his sister. At the beginning of the period of offending, Querion held 68,000 Astron shares worth, at that time, 30 cents each, and at the end of

the relevant period it held a little over 280,000 shares worth 80 cents each. The appellant managed Querion's share portfolio. Combined Oil & Gas Pty Ltd also had shares in Astron (250,000). The appellant held less than 1 per cent of the shares in Combined Oil & Gas, but the remainder were held by a company the shares of which were wholly owned by the appellant's mother, and of which the appellant was the sole director.

The appellant had tertiary qualifications in commerce, was a Fellow of the Institute of Company Directors, and had engaged in various courses related to securities trading. He obviously had knowledge of, and experience in, the stock market.
Prior to and immediately after the period of offending, the appellant used a single stockbroker. However, during the period of offending, he used three separate stockbroking firms. As part of a scheme which, as charged, was likely to create a false appearance as to the demand for Astron shares, the appellant engaged in conduct which included sometimes appearing on both sides of the market, having more than one bid on the market simultaneously through different brokers, giving instructions to the different brokers so that his own bids would leapfrog over each other (giving an appearance of active competition in a thinly‑traded stock), giving instructions to different brokers often only a matter of minutes apart, and not informing the brokers that he was placing bids through other brokers. During the course of the trading, one of the brokers became suspicious of the appellant's trading and asked him directly whether he was on both sides of the market, which he denied. The broker cautioned him that conduct of that kind could constitute market manipulation. During the course of that trading, another of the brokers saw another offer placed on the market which outranked the appellant's and telephoned the appellant to advise him of the new offer and ask the appellant what he wanted to do in respect of it. In fact, the offer was one placed by the appellant through a different broker. The appellant did not mention that the other offer was, in fact, his own, and instructed the broker to outbid the other offer.
There was evidence from the brokers used by the appellant, who gave evidence of what they saw on the screens available at their desks and their impression of that information. They saw the offers on the market and took them at face value, being unaware of the appellant's conduct. A trader gave evidence that he regularly watched the market on the Internet and in this case entered the market for Astron shares because of the appellant's activities. Had he known that the appellant was bidding against himself, the trader would not have done so. During the period of offending, the price of Astron shares rose from 35 cents to $1.
It was the defence case that the appellant's actions were not likely to cause a false or misleading impression, because potential buyers did not see the screens demonstrating the bids. Only the stockbrokers knew how many bidders there were and, at that time, could also discern from the screens the code identifying the bidding broker. Although not strictly relevant to the offence, it was also a part of the defence case that Astron was "a very good stock" and was at the time of trial selling for approximately $9. There was, in the defence case, "no crash in this case. There is no unhappy ending".
Her Honour directed the jury that it was not the prosecution case, and that therefore the prosecution did not have to prove, that the appellant intended to create a false or misleading appearance with respect to the market for Astron shares, or that he actually did so.
During the course of sentencing submissions, there were some observations by counsel, as well as by her Honour, which appear to reflect a mistaken belief that the appropriate inquiry, at that stage, was what view the jury must be taken to have formed of the appellant's intention. The task of a sentencing Judge, however, is to form his or her own view of the facts, provided that that view is not inconsistent with the verdict: Laporte v The Queen [1970] WAR 87 at 89; Mordecai (1985) 18 A Crim R 149 at 170. However, nothing turns on this issue. It is accepted by both the appellant and the respondent that her Honour did ultimately make the findings which I describe below, and that they were supported by the evidence.
Her Honour found, when sentencing the appellant, that the appellant was "interested in creating a particular appearance in the market which would ultimately be of some form of benefit to you ... by bidding up the market on various occasions in the manner that you did" (AB 401). She concluded that at least part of the appellant's motivation was greed and that this course of conduct appeared to him to have been an easy manner in which to increase the value of his holdings in Astron. Her Honour found that in his dealing with the stockbroker who directly asked whether the appellant was placing bids with another broker, the appellant intentionally left that witness with a false impression as to what was happening. Her Honour also found that the share trader who gave evidence, who was an experienced share trader, formed the clear and wrong impression from the appellant's conduct that there was considerable interest in the market in Astron, and acted upon that belief.
Her Honour considered at some length the appellant's otherwise good personal circumstances, to which I turn in more detail shortly. She considered that general deterrence was of importance in relation to offending of this kind, it being vital for the economy that the community has confidence in the share market and in institutions such as the ASX. Her Honour observed that offending of the type engaged in by the appellant undermines that confidence. She also observed, in my view correctly, that this type of offending is difficult to detect, and time‑consuming and expensive to investigate and pursue to trial (AB 408).
Against that background, the grounds of appeal are:
"1.The learned sentencing Judge erred in law in sentencing the Applicant on the basis that intention was a relevant and appropriate aggravating factor in the sentencing exercise:
PARTICULARS
(a)the Prosecution specifically elected not to run its case on the basis that the offender intended to intentionally create a false or misleading appearance in the market place;
(b)the statute provides for such an offence (involving intention as an element) but the prosecution elected to pursue only the lesser offence of doing something which was likely to create a false or misleading appearance;
(c)in the circumstances the question of intention was never required to be found by the jury as an element of the offence and they were specifically directed to this effect;
(d)it was accordingly inappropriate for the prosecution to assert as an aggravating factor in its case on sentence that the offender had intended to mislead the market;
(e)it was an error for the learned sentencing Judge to use intention as an aggravating factor or as an aspect of the case which had any relevance to the assessment of an appropriate sentence."
Ground 1A is identical with ground 1, save that it is concerned with a finding that the market was misled, rather than a finding as to intention.
"2. The learned sentencing Judged [sic] erred at law by imposing a sentence which was manifestly excessive in all the circumstances of the case.
PARTICULARS
(a)the sentence imposed failed to take into account the lack of any intention on the part of the offender to commit the offence in question;
(b)the sentence imposed failed to appropriately reflect the fact that no person had suffered any discernable [sic] economic loss as a result of the actions of the offender;
(c)the sentence imposed failed to adequately reflect the offenders [sic] age, antecedents and the consequences that the conviction itself would hold for his future."
A great deal of authority is cited in the submissions relating to grounds 1 and 1A, all of it to the same effect. The principle underlying this part of the appellant's submissions was summarised relatively recently in this Court in Hladin v The State of Western Australia [2005] WASCA 50, at [26] per Steytler P. His Honour said:
" ... a sentencing Judge is bound to take into account all the circumstances relevant to the commission of the offence, so long as he or she does not, in a case where there are circumstances of aggravation which might have led to a more serious count or to a separate count, sentence on the basis of an offence for which the accused has not been charged ... "
In applying that principle to the present case, the appellant submits that there was, in s 998(1) of the Act, a hierarchy of offences. The least serious was that offence committed where, without intending, a person's actions were likely to create a false or misleading appearance as to the market for shares; the next where, without intention, the actions did create a false or misleading appearance as to the market; then that there were actions likely to create a false or misleading appearance, and that it was intended to create that appearance; and, finally, the most serious offence being intending to create and actually creating a false or misleading appearance as to the market for shares. It is submitted that, having "charged" the appellant with the least serious of those offences, the prosecution was not entitled to suggest to her Honour that he had committed any offence at a more serious level, and that her Honour was not entitled to sentence him on that basis.
It is obvious that there are a variety of related behaviours to which s 998(1) was directed, and that it is possible for the same course of conduct to fall under more than one "limb" of the conduct proscribed. In Australian Securities Commission v Nomura International Plc (1998) 89 FCR 301, Sackville J broke the section down as follows (at 390):
"Section 998(1) of the Corporations Law provides that a person shall not:
(i)create; or
(ii)do anything that is intended to create; or
(iii)do anything that is likely to create
a false or misleading appearance
(iv)of active trading in any securities on a stock market;
(v)with respect to the market for any securities; or
(vi)with respect to the price of any securities."
His Honour could have broken the proscribed conduct down still further, since at least in some situations it may be possible to characterise the appearance created as either false or misleading. In Nomura, his Honour found that the conduct in question was conduct which was intended to create a false or misleading appearance of active trading and a false or misleading appearance with respect to price, and that the conduct was likely to create a false or misleading appearance of active trading and a false or misleading appearance with respect to price; that is, the conduct encompassed all of the items which his Honour had numbered (i), (iii), (iv) and (vi), in a variety of permutations (at 403 ‑ 405).
There is nothing in s 998, however, which suggests that there is any hierarchy of offending. There is simply one offence, which can be committed in a number of different ways, with but one penalty attached to it. Not only are there not different offences created, each having as an element one or more of the various "limbs" identified by Sackville J, but the legislature has plainly refrained from designating any of the various "limbs" as a circumstance of aggravation.
The appellant's proposition is simply that, in the general run of cases, intentionally creating a false or misleading appearance with respect to the market for securities is a more serious matter than engaging in conduct which is likely to have that effect, but without intending that the conduct do so. That may very often - perhaps usually - be the case. However, much will depend upon the circumstances of the case. The question of the state of mind of the offender, of whether there was any actual effect upon any person, or upon the market as a whole, the scale of the conduct actually engaged in or of the effect intended or likely to have been achieved, and the offender's motive in engaging in that conduct, will all be relevant. It is simply impossible to say that the element of intention is so important that, without having expressly said so, the legislature must have intended that it could not be taken into account unless distinctly charged as either an element of the offence, or as a circumstance of aggravation. No authority is cited for the construction contended for, and it is not a logical construction.
Reference was made during the course of argument to one case from which it appears that, even where two offences are created by the same section and bear the same penalty, it is not permissible, in sentencing an offender for one of those offences, to have regard to the fact that the circumstances encompassed the elements of the other. That is R v Young [2003] NSWCCA 276, cited in R v Hooper [2004] NSWCCA 10. However, in Young's case, the Court was concerned with the very unusual situation of robbery and stealing from the person as offences created under s 84 of the Crimes Act (NSW). It appears that, although both were created by the same section and bore the same maximum penalty, the elements of the offence of robbery encompassed all of the elements of the offence of stealing from the person, but also included the important additional element of a threat or force putting the victim in fear. One can understand in a case of that kind - where two offences were created, but one encompassed an element in addition to all the elements of the other - that the section would be construed as creating one offence of lesser, and one of greater, seriousness. However, s 998(1) is plainly not a provision of that kind. Grounds 1 and 1A cannot be made out.
Turning to ground 2, the first particular cannot be made out in light of the conclusion I have reached in relation to grounds 1 and 1A.
In order to consider the other particulars, it is necessary to mention the appellant's personal circumstances. At the time of sentencing, the appellant was 34 years of age. He had a good education, family support, and had participated in sporting activities. He did not have significant assets. He was a director of a number of investment companies and a beneficiary of discretionary and other trusts. Information about the assets of the trusts, or about any income derived from the directorships, was apparently not made available to her Honour. It was, however, asserted on his behalf that he had incurred debts as a result of the legal fees required for his trial, that he had no capacity to pay a fine, and that any fine imposed would have to be paid by his mother.
He had no prior offences, save for one driving conviction which resulted in a spent conviction. It was submitted that he was embarrassed by the considerable publicity attendant upon his case, that he had co‑operated "entirely" with ASIC in their inquiries, that his reputation would be substantially affected by the conviction, and that he would, as a result of conviction, be disqualified from practising as a company secretary or director, thereby losing sources of income otherwise available to him.

The submissions in relation to his personal circumstances can be accepted, but with these observations. The co‑operation with the authorities by the appellant consisted of informing them of a computer that they might not otherwise have discovered, which did not lead to any evidence in addition to that tendered at trial. It consisted also of making certain formal admissions, which no doubt shortened the length of the trial. Those formal admissions seem largely to relate to matters which could otherwise have been proved (somewhat laboriously, no doubt) by reference to documentary material. The shortening of the trial was, of course, a public benefit, but also saved the appellant some legal fees.
It is submitted on behalf of the appellant that the offence could not be committed in the same way again, and therefore the need for general deterrence was reduced. The offence could not be committed in precisely the same way again, since it is now the case that the relevant terminal

screens seen by broking houses do not display the number of the broking firm next to each order. However, the use of the three different brokers, who unwittingly placed leapfrogging bids, is behaviour which could be readily replicated. In any event, I would understand the need for general deterrence as extending more broadly than merely deterring others from committing offences in precisely the same way as the appellant; rather, the need is to deter others from engaging in market‑rigging behaviour.

It may be accepted that the appellant had previously good antecedents and that the effect of his behaviour was limited to the trader who gave evidence, and to the brokers he employed. There was, in the case of these shares, no "crash" and no wider effect upon the market. That is, no doubt, why her Honour chose to impose a fine, rather than imprisoning the appellant.
However, I am unable to accept that the quantum of the fine was unduly severe. Indeed, it seems to me that it was lenient. A person who, as the appellant did, deliberately and dishonestly engages in behaviour which he expects will mislead the market, is behaving in a manner which has the potential adversely to affect many members of the community and has the potential to undermine confidence in the share market, which is an important institution in the functioning of the economy. Further, it is, as her Honour observed, behaviour which is difficult to detect. There are some similarities with fraud upon the revenue in those respects. In my view, it would have been open to her Honour to have imposed a term of imprisonment, although the term would be of relatively short duration, having regard to the mitigating factors to which I have already referred. The fine imposed, which was three‑eighths of the maximum fine available, appears to me to have been at the very bottom of any appropriate sentencing range for the conduct of the appellant. Ground 2 therefore cannot be made out.
I would dismiss this appeal.
BUSS JA: I agree with Wheeler JA.